How the Credit Mess Squeezes You

By

Scott Patterson

Updated March 2, 2008 12:01 a.m. ET

Every day, it seems, investors hear stories about a "credit crunch" that's squeezing pocketbooks around the country. What's it all about?

The bad news started in the housing market, as a big runup in prices deflated and homeowners began to default on mortgages in record numbers. That hurt the value of arcane debt securities tied to "subprime" mortgages made to high-risk borrowers -- leading to big losses at...